Annulments, Rescissions and Recalls

Annulments, Rescissions and Recalls

June 2008

Introduction

1. What is an annulment?

The annulment procedure applies to bankruptcy only. Once a bankruptcy order has been made it can be ’annulled’ i.e. cancelled, only by order of the court. An annulment releases the bankrupt from the restrictions placed upon him or her by insolvency law and once it is made the individual is no longer bankrupt. Annulment can be sought at any time, even after the bankrupt has received discharge from bankruptcy.

 

2. Why would an order be annulled?

The most common reasons that a court may order that a bankruptcy be annulled are as follows:

a. If, at the time the bankruptcy order was made, there was a valid reason why it ought not to have been made

b. that the debts and expenses of the bankruptcy have either been paid in full or secured to the satisfaction of the court

c. that an individual voluntary arrangement (IVA) or fast-track voluntary arrangement (FTVA) has been approved.

 

3. How is an annulment application made?

(Amended June 2010)

Generally, the bankrupt (or representative) must apply to the court for an annulment of the bankruptcy order. In certain circumstances the petitioning creditor’s solicitors may make the application for annulment, e.g. where their client has failed to notify them that the debt has been paid prior to the bankruptcy. The court will then set a date for the hearing.

Notice of the time, date and place for hearing the annulment application, together with copies of the application and supporting witness statement setting out the grounds on which the application is made, must be given to the official receiver (and any trustee) by the applicant. Notice of the application is usually also received from the court

 

4. Costs

It is important for the official receiver to establish before the hearing, exactly who will be responsible for the costs. The party making the application will require an estimate of the total costs incurred by the official receiver. This is calculated by liaison between the examiner, court liaison officer (CLO) if the office has one, case officer, and the cashier, to ensure that the appropriate costs, fees, expenses and any other disbursements have been taken into consideration See paragraph 19 for further details on providing this estimate. Any payment due in respect of costs should be received in advance of the hearing.

The official receiver, or representative, usually an assistant official receiver (AOR), should attend the annulment hearing to ensure that the question of costs is dealt with satisfactorily, as this becomes more difficult to address after the annulment order has been made.

 

5. Bankruptcy order ought not to have been made

Where there is an application to annul on the grounds that the bankruptcy order ought not to have been made, the applicant only has to give the official receiver (and any trustee) sufficient notice to allow them to attend the hearing. An application for annulment on the grounds that the order ought not to have been made, is essentially a dispute between the debtor and the creditor. The bankrupt must, therefore, inform the petitioning creditor of such an application.

Examples of why a bankruptcy order should not have been made are:

a.   that the proper procedures involved in obtaining the order were not followed

b.   where the debt to the petitioning creditor had been paid in full prior to the date of the hearing of the petition, when the bankruptcy order was made

The official receiver will not normally make a report in these circumstances unless it is considered that the conduct of the bankrupt should be reported to the court, but will attend or be represented at the hearing to ensure that if the application is granted, provision is made for the payment of the official receiver’s costs.

 

6. Debts paid in full or secured to the satisfaction of the court

(Amended June 2010)

Where a bankrupt applies for an annulment on the grounds that the debts and expenses of the bankruptcy have been paid in full, he or she must give the official receiver (and any trustee) at least 28 days notice of the hearing.

Where the official receiver is trustee, a report must be prepared and sent to court containing the following information:

a.   the circumstances leading to the bankruptcy

b.   a summary of the assets and liabilities, both at the time of the bankruptcy order and at the date of the application, explaining any differences

c.   confirmation of the extent to which debts have been paid or adequate security given to creditors

d.   details of any known creditors whose claims have not been proved

e.  whether the official receiver supports the bankrupt’s application

The report may include any other matters which the official receiver believes should be drawn to the court's attention, such as, any lack of co-operation by the bankrupt.

A copy of the report must be filed at court not less than 21 days before the hearing, and a copy must be sent to the bankrupt (or representative) at the same time (for cases where the bankruptcy petition was presented before 6 April 2010 the report has to be sent to the bankrupt least 14 days before the hearing). If there is a trustee other than the official receiver in office, responsibility for providing the report rests with that trustee.

 

7. Payment of the debts in a ‘payment in full’ annulment

Where it is a payment in full matter, payment of the debts can be made either via the trustee, official receiver or a third party, e.g. a solicitor. The latter method is known as paying debts ’outside the proceedings’ and is by far the most common type of payment. If the debts are paid outside the proceedings, proof of payment should be requested to enable the official receiver to report to court on this. In practice the court may look to the bankrupt to provide evidence that the debts have been paid. The occurrences of annulment through payment in full ‘inside the proceedings’ are quite rare.

 

8. Individual voluntary arrangement approved

(Amended June 2010)

Where the creditors have agreed to a bankrupt's offer to pay them under an IVA, application for annulment may be made by the bankrupt 28 days after the supervisor has reported the results of the meeting of creditors.

Where the annulment application is made by the bankrupt and the bankruptcy petition was presented on or after 6 April 2010 he or she must give 5 business days notice of the venue of the hearing. In cases where the petition was presented before 6 April 2010 he or she must give 7 days notice of the venue of the hearing. The notice must be accompanied by copies of the application and witness statement and be given to the official receiver, the supervisor of the voluntary arrangement and any trustee.

Where the bankrupt does not apply for an annulment following the approval of an individual voluntary arrangement, the official receiver may make the application. For details please see Technical Manual (TM) Chapter 6A Part 4 Annulments – Annulment following approved IVA or FTVA.

For more information regarding an IVA, please see Case Help Manual (CHM) part – Individual Voluntary Arrangements.

 

 

9. Annulment following an approved FTVA

(June 2010)

The official receiver also operates a streamlined Fast Track Voluntary Arrangement (FTVA) procedure in some circumstances. It is for the official receiver to make the application for annulment following the approval of a FTVA. The official receiver must give notice of the venue, accompanied by copies of the application and the report, to the bankrupt not less than 5 business days before the date of the hearing. In cases where the petition was presented before 6 April 2010 the notice period is 7 days. For more information please see TM Chapter 6A Part 4 Annulments – Annulment following approved IVA or FTVA  

For more information regarding an FTVA, please see the CHM part – Fast Track Voluntary Arrangements

 

10. Stay of advertisement and stay of proceedings

(Amended June 2010)

The court may, in advance of the hearing date, make an interim order that all or part of the proceedings are stayed (put on hold). This could range from a stay of advertisement to a stay of the entire proceedings. Where the order includes a stay, notice of this must be given to Estate Accounts Services (EAS) at gpt.gazettestays@insolvency.gsi.gov.uk).

When the court orders a stay of advertisement, the official receiver must not gazette or advertise in any other manner the making of the winding- up order or bankruptcy order. Details of the stay must be entered on LOIS (CA06) so that in a bankruptcy the bankruptcy entries do not appear on the Individual Insolvency Register (IIR). Every effort must be made to ensure that such an order is obeyed as failure to do so could have serious consequences.

For further information please see the CHM parts – Stay of Advertisement or CHM part – Stay of Proceedings 

  

11. Entries on the Individual Insolvency Register (IIR)

(June 2010)

Where the bankruptcy petition was presented before 6 April 2010, on the making of an annulment order the bankruptcy entries on the IIR will be deleted once the annulment has been entered on LOIS (CA06).

In cases where the bankruptcy petition was presented on or after 6 April 2010, on the making of an annulment order the entries on the IIR will not be deleted until a certain period of time has elapsed after the LOIS entries are made (up to 3 months depending on the grounds of the annulment). It is important that the date of the annulment is entered on LOIS (CA06) promptly.  Where a bankrupt obtains a stay before the annulment hearing (see paragraph 10  above) the examiner should advise the bankrupt that without further order the bankruptcy details will appear on the IIR after the annulment has been obtained. As a result the bankrupt may seek an order for the continued withholding of his or her details from the IIR as part of the annulment order. Where such an order has been obtained the stay must be shown as continuing on LOIS (CA06) and a call must be made to the IBM helpdesk to request CWS to remove the details of that bankruptcy from the IIR permanently.  

For further information see Technical Manual Chapter 6A Part 7 – Action required following annulment of bankruptcy order

 

12. Land Registry Entries

The annulment order will normally include a provision that the Pending Action (Bankruptcy) PA(B) and Writs & Orders (Bankruptcy) WO(B) entries at the Land Charges department be vacated. There may also be entries made in the proprietorship register maintained by the Land Registry. It is a matter for the former bankrupt to seek the vacation of such entries and the official receiver should not be involved.  Where the annulment application is successful but the court does not dismiss the petition, vacation of the PA(B) entry will not be provided for in the order, as the petition will be re-listed for hearing.

It is important to ensure that any cautions or Form J Restrictions registered with HM Land Registry by the official receiver are withdrawn following the annulment. Failure to do so could lead to the official receiver being liable for damages. For more information please see the CHM part – Withdrawal of a Caution or Form J Restriction   

 

13. Advertisement of the annulment order

Where an order of annulment is made, the former bankrupt is entitled to request, in writing, within 28 days of the making of the annulment order, that the making of the order be published in the London Gazette (and also in the same manner as the bankruptcy order may otherwise have been originally advertised, such as in a local newspaper). If the request is forthcoming and is made within the 28 day time limit, the official receiver is required to publish a notice in the Gazette, and also publish notice in the same manner of any other advertising that may have originally been done. Costs are to be covered by the administration fee.

Word templates for the annulment gazette and advertisement are available within the Case Help Manual part ‘Publication of Insolvency Information’. These forms should be completed fully so as to comply with the content requirements of the Rules. 

 

14. Notice To Creditors

The official receiver has a duty to inform those creditors who received notice of the bankruptcy, that the order has now been annulled. The official receiver should generate form NABO – ‘Notice of annulment of bankruptcy order’, and forward to all creditors previously notified of the order. This applies whether or not the official receiver has acted as trustee. Under the Insolvency Rules, even if an insolvency practitioner trustee is in office at the time of the annulment, the obligation to notify creditors rests with the official receiver. In such instances, before undertaking this task the official receiver should liaise with the trustee to ascertain whether he or she has already notified creditors.

 

15. Appeals

(Amended June 2010)

Any decision made by a court can be challenged by way of an appeal. An appeal may only be brought with either the permission of the court that made the decision, or the permission of the court which has jurisdiction to hear the appeal, i.e. a court with higher authority. Once an order or decision of the court has been made, the appellant has 21 days to file the notice of appeal at court. Notice of an appeal does not stay the proceedings.

An application for annulment should not be confused with an appeal. With an appeal a court with higher authority is asked to review the decision of the lower court. In the case of a decision made in a county court or by a registrar of the High Court, an appeal is made to a single judge of the High Court. Where the decision was made by a judge of the High Court, appeal lies to the Court of Appeal. In contrast, applications for annulment are made to the court that made the bankruptcy order, or the court to which the case was subsequently transferred, and can be made at any time.  

 

16. Rescission of a bankruptcy order

(June 2010)

The court has the authority to review, rescind or vary any order that it has made. If the conditions to annul a bankruptcy order do not exist the bankrupt may decide to apply for a rescission of the bankruptcy order under these provisions. A rescission is only likely to be granted in exceptional circumstances and the effect is to ‘cancel’ the bankruptcy order in a similar way to an annulment.

 

17. Rescission or recall of a winding-up order

(Amended June 2010)

A winding-up order may be cancelled by way of a rescission or recall. Any application for the rescission of a winding-up order should be made within 5 business days of the making of the order, although the court has the power to extend this time limit if necessary.

The rescission or recall provisions are often used to ‘withdraw’ winding-up orders made in late payment cases, in preference to the ‘stay’ procedure which is considered to be more cumbersome (see below) and does not have the effect of cancelling the order. When a winding-up order is rescinded or recalled by the court, the official receiver should receive at least 3 copies of the order.

 

18. Stay of proceedings (stayed generally)

(Amended June 2010)

The court may at any time after a winding-up order has been made, on the application of the liquidator, the official receiver or any creditor or contributory make an order staying all proceedings in the winding up. A permanent stay is usually referred to as ‘stayed generally’ and it brings the winding up to an end, but it does not cancel the winding-up order. The grounds for such an application may include payment of the debt(s) in full. It must not be confused with an order staying the proceedings for a fixed period of time as such an order only suspends the winding up, it does not end it. It is the responsibility of the company, or otherwise as may be prescribed in the order, to forward a copy of any stay order made, to the Registrar of Companies.

For more information see the CHM part – Stay of Proceedings

 

19. Fees and disbursements

The sum due to the official receiver in respect of costs incurred will depend on the amount of work that has been undertaken in each individual case. The official receiver will need to estimate the total costs, fees and expenses for an estate, before any court hearing for annulment or rescission of a bankruptcy order, or rescission or recall of a winding-up order. The cashier will be expected to provide this calculation from information provided by the examiner, CLO and case officer. The procedure for arriving at this sum will depend on the date of the insolvency order as a new financial regime was introduced for those cases where the insolvency order was made on or after 1 April 2004.

Detailed guidance on the appropriate amounts to be charged is given in the Technical Manual (TM) Chapter 36 – Estate Accounting - Part 1

Where a bankruptcy order made on or after 1 April 2004 is annulled, or a winding-up order made on or after 1 April 2004 is rescinded, recalled, or permanently stayed, the full administration fee should only be charged when the official receiver has undertaken significant material work on a case. If, for example, the initial notices have not been issued, a reduced administration fee could be charged, with sanction of the court, equivalent to the actual time spent in administering the case, plus disbursements.

In such matters, a calculation should be made by multiplying the time spent by the official receiver and other staff undertaking the work, by the relevant hourly rate according to who performed the tasks. The appropriate hourly rates for each grade are set out in The Insolvency (Amendment) Regulations 2004 and can be viewed in the TM Chapter 36 – Estate Accounting Annex E There are two ‘tables’ of rates in Annex E, one for the London insolvency district and the other for provincial offices. The time and rate calculation should exclude VAT in this instance as it is being used as a guide only. It is still an administration fee that is being charged and thus VAT cannot be charged. The cost of any disbursements, e.g. advertising costs, travel and subsistence, etc, should be added to the reduced administration fee when calculating the costs payable to the official receiver.

The official receiver should seek to have the level of the reduced administration fee sanctioned by the court and included in the wording of the order. It is important to ensure that as far as possible, the appropriate costs are paid before the court orders the bankruptcy order to be annulled, or the winding-up order to be rescinded, recalled or permanently stayed.

  

20. Annulment where a Bankruptcy Restrictions Order (BRO) or Bankruptcy Restrictions Undertaking (BRU) has been obtained

It is possible that a bankrupt may apply for annulment of a bankruptcy order after the official receiver has submitted a statement of facts to the  Authorisations Team. In such matters the official receiver should inform the  Authorisations Team of the annulment application, and report to the court in broad terms what has been referred to the Team. It will then be for the court to decide how to proceed in light of this information.

Also, it may be possible for a bankrupt to apply for annulment after a bankruptcy restrictions order (BRO) has been made or a bankruptcy restrictions undertaking (BRU) has been accepted. The official receiver should notify the Authorisations Team of the bankrupt’s application.

If an order is made annulling the bankruptcy order on the grounds that the order ought not to have been made then:

a.   any BRO/BRU in force shall be annulled

b.   no new BRO may be made

c.   no new BRU may be accepted

Where a bankruptcy case involving a BRO/BRU is annulled, the official receiver should record this on LOIS, (CA06) to ensure that the Individual Insolvency Register (IIR) is updated, and also, inform the Authorisations Team.

Where the annulment order is granted on the grounds of payment in full or following approval of an IVA then:

a.   the annulment does not affect the BRO/BRU, i.e. it remains in place

b.   the court may make a BRO on an application instituted before the annulment

The Secretary of State may accept a BRU offered before the annulment, and then an application for a BRO or interim order in respect of the bankrupt may not be instituted after the annulment.

Notes:

a   In order to comply with Rule 6.214, where the official receiver is trustee, a copy of his final account must be submitted to Corporate Governance Section (acting for the Secretary of State) and a further copy filed at court, as soon as possible after a bankruptcy order is annulled.

b   A spreadsheet is available on the shared drive called ’Final Account’.  The cashier is required to complete this with details of all the transactions made from the LOLA estate ledger. There are instructions available on the shared drive to aid the completion of the final receipt and payments account.

c   If the case has been handed over to an insolvency practitioner (IP) the official receiver will not be required to attend any court hearing for annulment. The official receiver is entitled to receive a copy of the IP’s report to court and may wish to make an additional report to the court. If the official receiver decides to file an additional report to court, a copy must also be sent to the bankrupt under cover of form LCRTB – ‘Letter covering reports sent to bankrupt’. This must be sent at least 5 business days before the hearing.

d   Where an insolvency order has been annulled, rescinded, recalled or permanently stayed, the books and papers, valuables or any other items taken into safekeeping by the official receiver, must be returned to the bankrupt, partner or director.

e   When notifying HMRC of any matters relating to annulments, the notice or communication should be sent to:

HMRC DMB (Debt Management and Banking)

ICHU Room BP2302

Benton Park View

Longbenton Newcastle Upon Tyne

NE98 1ZZ

If known, the VAT registration number must be included in any correspondence.

 

Where can I find out more?

Insolvency Act 1986

Section 147 – Power to stay or sist winding-up order

Section 282 – Court's power to annul bankruptcy order

Section 299(4) – Time of release where bankruptcy order annulled

Section 375 – Appeals etc. from courts exercising insolvency jurisdiction

 

Insolvency Rules as amended by Insolvency (Amendment) Rules 2010

Rule 6.206 to 6.214 – Annulment of bankruptcy order

Rule 7.47 – Appeals and review of court orders in corporate insolvency

Rule 7.49A – Procedure on appeal

The Insolvency (Amendment) Regulations 2004

The Insolvency Proceedings (Fees) (Amendment) Order 2007

 

Notices

F5/03 – Changes to the processing of expedited audits and supplementary audit applications

T18/05 – Insolvency Act 1986 section 282 (1)(b) Bankrupt not entitled to annulment of bankruptcy order where court not satisfied that debts paid or secured as bankruptcy file destroyed.

T51/05 – Bankruptcy: Annulment Orders obtained on the payment in full grounds: (re)financing schemes: time limit for paying the creditors.

F18/07 – Changes to Insolvency fees

T18-08 – Information on the High Court decision in Halabi v London Borough of Camden, affects on applications for annulment on payment in full grounds.

 

Technical Manual

Chapter 5 – Publication of insolvency information

Chapter 6 – Appeals, Stays, Rescissions and Annulments

Chapter 6A – Annulment

Chapter 36 – Estate Accounting

Case Help Manual

Publication of insolvency information

Stay of Advertisement

Stay of proceedings

Individual Voluntary Arrangements

Fast Track Voluntary Arrangements

Leaflets & Publications

Insolvency Service leaflet – ’Can my bankruptcy be cancelled?’

(Available from Official Receivers’ offices or online at www.insolvencydirect.bis.gov.uk    ‘Publications’)

LOIS Workbook

Annulments Process – Screen 6

Forms to be used:

LCRTB – ‘Letter covering reports sent to bankrupt’

NOACNP – ‘Notice of Annulment – Creditor not proved’

ANNULIVA -  IVA  Application for Annulment

ANNULFTVA – FTVA Application for Annulment

ANNUL – Order of Annulment under  Section 282

ANNULIVA2  - Order of Annulment IVA section 261

ANNULFTVA2 – Order of Annulment FTVA section 263

NABO – ‘Notice of Annulment of bankruptcy order’

Gazette Notice - Annulment of Proceedings under section 261 or 263D – Click HERE

Gazette Notice – Annulment of Proceedings Section 282  - Click HERE

 

Click HERE to view the Flowchart for Annulment of a Bankruptcy Order

Click HERE for the Flowchart for Rescission or Recall of a Winding-Up Order

 

Procedure

1 Receive notification of an application for annulment of a bankruptcy order or for rescission or recall of a winding-up order.

2 Check to see if the court has ordered a stay of advertisement or a stay of proceedings. If so, refer to the CHM parts: ‘Stay of Advertisement’ or ‘Stay of Proceedings’ and attempt to ensure that all advertising is stopped. Enter details of the stay on LOIS (CA06).

3 When known, note the date of the annulment, rescission or recall hearing and enter details on to LOIS, (CA08) under 'comment' heading of 'Rescissions/Stays in companies or 'Annulments in bankruptcies'.

4 Where there is an application for annulment on the grounds that all the debts and expenses have been paid in full, the examiner will prepare the official receiver's report to court (unless the official receiver is not the trustee).

This report must be filed at court at least 21 days before the hearing and a copy must be sent to the bankrupt under cover of form LCRTB at the same time.

5 Confirm with the cashier that the appropriate fee(s), costs, expenses and other disbursements have been calculated and posted to the estate on LOLA. If not previously done, obtain an estimate of the official receiver’s total costs and inform the applicant of the amount required.

6 On the day before the hearing, pass all papers to the senior officer (usually an AOR), who will be attending the hearing.

Hearing adjourned

7 If the hearing is adjourned note the new date and enter details on to LOIS, (CA08) under 'comment' heading of 'Rescissions/Stays in companies or 'Annulments in bankruptcies'.

8 On the day before the new hearing ensure that any further relevant information is added to the file and pass it to the AOR attending the hearing. Remember to account for any additional travelling or other additional expenses. 

Hearing - application failed

(Amended June 2010)

9 Should the court refuse to annul the bankruptcy order, or to rescind or recall the winding-up order, the case would then be administered in the normal way. If there was a stay in place the date that it ended must be entered on LOIS (CA06) so that in bankruptcy cases the details then appear on the Individual Insolvency Register (IIR).

Hearing - order made  

(Amended June 2010)

10 When the result of the hearing is verified as annulment of the bankruptcy order, or rescission or recall of the winding-up order, update LOIS, (CA06) and enter the date in the "Expedited Audit Applied For" field of LOIS, (CA26), even though expedited audits are no longer carried out. If there was a stay in place before the hearing and the court has ordered as part of an annulment order that the bankruptcy details should not be shown on the IIR, the details on LOIS (CA06) should be amended to show that the stay is continuing and has no expiry date. Where such an order has been included in the annulment a call must also logged with the IBM helpdesk to ensure that the IIR entries are permanently withheld.

11 Where a bankruptcy order is annulled and the official receiver is receiver and manager, the cashier will enter a nil or debit balance on screen GLM81 and enter the case details on the 'Cases for Closure' spreadsheet which is sent by e-mail to EAS each month. EAS will update LOLA and change the status of the case to ‘financially annulled’.

12 Where a bankruptcy order is annulled and the official receiver is trustee, the cashier will enter a nil or debit balance on screen GLM81 and enter the case details on the 'Final Account' spreadsheet. A final account of receipts and payments by the official receiver must be completed from the information on the LOLA ledger. There are ’Final Account Instructions’ available on the shared drive to assist with completion of the spreadsheet.

13 In order to comply with Rule 6.214, a copy of the official receiver’s final account must be submitted to Corporate Governance Section (acting for The Secretary of State) and a further copy filed at court as soon as possible after the annulment.

14 The case details should then be entered on the 'Cases for Closure' spreadsheet which is sent to EAS (see step

15 Where a winding-up order is rescinded the cashier will enter a nil or debit balance on screen GLM81 on LOLA and enter the case details on the ‘Cases for Closure’ spreadsheet which is sent to EAS each month. EAS will up-date LOLA and change the status of the case to ‘financially rescinded’.

16 Where the case has been permanently stayed(stay generally), the cashier will enter a nil or debit balance on screen GLM81 on LOLA but must not enter the case details on the 'Cases for Closure' spreadsheet as this may result in a release certificate being sent to Companies House. Instead the cashier must send to EAS a ‘Permanent Stay Notification’ which is available on the shared drive. The cashier will have to state whether the deposit has been returned to the petitioning creditor's solicitor or transferred to the reserved funds account. 

17 Notify creditors and any others who have previously been informed of the bankruptcy order, that the bankruptcy has now been annulled, using form NABO. In company or partnership cases there are no specific forms available for this purpose, but all those who were originally informed of the winding-up order must now be notified of any rescission, or permanent stay of the winding-up order.

18 Where the petitioning creditor was not present at the hearing, it is important to inform them of any annulment, rescission, or permanent stay of the insolvency order. Also, in cases where a winding-up order has been made against a company, a copy of any subsequent order rescinding or recalling the winding up, must be filed with the Registrar of Companies.

19 File case papers in accordance with local office procedures.

20 If, within 28 days of the making of the annulment order the former bankrupt requests (in writing) that the OR publicise it, the OR is required to publish notice in the London Gazette and to advertise in any other manner that the bankruptcy order was first advertised. Costs will be covered by the administration fee.